Trend Capture Rating Framework for Risk Management

This technical report presents Trendrating's Trend Capture Rating (TCR) framework, a risk management tool designed to address the risk of poor performance in investment portfolios. The document outlines the methodology for capturing the aggregated momentum rating for markets, sectors, and portfolios, demonstrating the correlation between TCR and forward returns over a 15-year analysis period. It details the performance of various portfolios, including the Global Market Portfolio and regional portfolios for Developed Europe and the USA, highlighting the significant outperformance of high-rated portfolios compared to low-rated ones. The report includes a comprehensive analysis of the risk-return trade-off, emphasizing the importance of maintaining a portfolio rating of at least B+ to optimize returns. Additionally, it discusses the implications of TCR on investment strategies and the necessity for investors to adjust their portfolios based on market trends to mitigate underperformance risks.